"We do know that it's [China's economy] decelerating substantially," Simon Warner, head of macro markets at AMP Capital told CNBC's "Cash Flow" after the numbers were announced. "This is the first time we've seen some degree of stabilization."

Monday's data may put fears of a China slowdown to rest only for the short -term. China-related losses may be contained if June U.S. retail sales, industrial production and housing starts - all due for release this week - provide evidence of a steady path towards recovery.

The U.S. Federal Reserve Chairman Ben Bernanke's semi-annual testimony before Congress this week will also be scrutinized and any dovish reiteration by the Fed chief that normalization of short-term interest rates is a long way off may also help sentiment. Many believe Bernanke has already made his views on the Fed's policy path clear and financial markets have taken account of his position.

Still, there's scope for volatility, and commodity markets are no exception, as investors try to determine when the U.S. data reaches so-called "escape velocity" – or when economic activity is strong enough and self-sustaining to merit scaling back stimulus.

"This market looks overbought but the Bernanke 'put' on U.S. equities is also a 'put' on oil," said Tom Weber, senior commodity advisor at Portfolio Managers, Inc. Commodity Futures & Options in Los Angeles, who has a 'bullish' view on the oil market this week.

Reflecting the multiple event risks, opinion was almost evenly split on oil price direction this week. Five out of nine of those polled, or about 56 percent, are looking for a reversal lower this week while four respondents, or 44 percent, predicted more gains, the survey showed.

"This market is overdone," said Mark Waggoner, president of Excel Futures in Bend, Oregon. "It's inevitable that a sell-off is looming. Demand is going to wane and I still think $79-$84 is the target on WTI (West Texas Intermediate, the oil grade underpinning the U.S. crude futures contract) and Brent within 30-45 days."

(Read More: Oil prices jump as US crude takes bigger role on world oil stage)

U.S. crude futures last week hit their highest level since March 2012, posting its third weekly increase, after data showed higher U.S. gasoline demand and a record drop in crude stocks. Brent crude for August rose $1.08 to settle at $108.81 a barrel on Friday, while U.S. crude settled up $1.04 at $105.95.

Fears of supply disruptions from the Middle East largely remain with little material disruption to supply reported, though Portfolio Managers' Weber did say the turmoil in Egypt continued to buoy oil. "Even though I don't see closure of the Suez [Canal] as a remote possibility, barring a marked loss of military control, it makes a great bullish headline and helps oil move higher."

Though a higher risk premium no doubt contributed to higher prices, it only partly explain oil's rally and more importantly the relative outperformance of WTI against the Brent benchmark and the tightening of the price spread between the two gauges. Stronger gasoline prices, sharp drawdowns in U.S. fuel stockpiles combined with efforts to drain a supply glut at Cushing, Oklahoma have been, and are likely to continue to be, key price drivers for the remainder of the year.